Yesterday, I had my best paper trading day that I can remember in a while. With my new trading plan based on 200 share positions at entry, while exiting half when a price target is hit and letting the rest run, I garnered about $350 in simulated profits on four winning trades. Today, I broke just above even on 3 trades with only one winner. I am feeling very confident with my new strategy based on using the opening range as support and resistance to ride price momentum on stocks that gap up or down.
UPDATE: I shorted (paper trading) 100 shares of GLD at 88.57 on the first sign of price action post FMOC – I was stopped out when it spiked past $88 with crazy whipsawing. Five minutes for a .54 profit.
My general observation is that I still need to avoid chasing; if I miss an anticipated move because of hesitation, it’s better to wait for a retracement, reversal or consolidation – a chase makes my entry further away from the technical level that is best for a stop loss – thus leading to greater losses when I chase and my call is wrong! It’s a balance between having a tight stop and letting a trade breath to minimize losses and preserve profits. It’s an art in which wicks may take you out, and a penny may be the difference between a good outcome and one that’s not that great. The phasing out of a position has really helped in this regard, as when I take partial profits (usually after a .50 cent move depending on ADR and support/resistance), I have some cushion to let a trade run it’s course. I reduce my risk and have more break even outcomes when a trade makes a quick reversal after hitting the preliminary price target threshold. At the same time, the partial profit gives me more confidence to stay in a trade and let the winners extend. The challenge then is the first half of the trade making sure I time my entry right (e.g. not hesitating or chasing) and only pulling the trigger on good setups.
Onto REALITY….
My wife was laid off yesterday on her second day back from maternity leave. She is relieved as she had been unhappy for awhile and now gets to spend lots of time with the newborn. Because of significant belt tightening (e.g. no daycare bill, my cell phone plan was $40 a month more than the minutes I was using, no eating out, and many similar changes, etc.) and some of the stimulus funded unemployment benefits (especially the 65% support of COBRA for nine months) – our household will be fine for at least one year without any catastrophic changes, and not having to touch our savings/retirement or even the decent severance payment they are offering. This is even if my wife does not find new work and I don’t take on major new contracts or teaching assignments…
But this mixes everything up, including the time I am spending on trading (and not making money from more risk-free endeavors like expanding my client base) as well as the capital I’m using for trading (who knows what the future holds but that money would pay the mortgage for six months). On top of this, I’m going to be taking on some new expenses as I can not work at home with my wife and kids here – not only would it destroy our marriage, but I would never get any projects done let alone be able to trade. So I am scoping out very affordable office space about a mile from our home. This is scary to take on this new cost at this time. To add to the uncertainty, two of my clients have me only retained through the summer (though want to keep me on longer, but are under pressure with the economy as well…)
The safe route would be to close my prop account and put that money in a FDIC insured savings account for a very rainy day. More importantly, would be to discontinue the investment of time on blogging, paper trading, or even trading with small positions – and drum up additional work (my skill set is in demand so I could find new contracts with relatively minor effort – much less than I put into trading for sure).
However, I’m not going to pull the plug on trading. My main GOAL is still not to blow out my account. But I have other considerations now, mainly how much time I can continue investing into flattening my learning curve as a trader versus the opportunity costs of not putting that time into a more guaranteed route.
It feels like I have a clock ticking now, where as before I could dally around and take my time….
